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There’s a clear need to make data more available for niche asset classes, where, oftentimes, processes need to be done multiple times due to data differences and availability.
Many in the industry believe that there is an opportunity to have more data consistency across sources and processes to ensure that inconsistencies are resolved before data is acted upon, said Piero Falcucci, Chief Risk Officer & Chief Actuary, at Triangle Life.
“Getting timely data and having to manipulate
it is a challenge for everyone.”
Falcucci was giving his views in a webinar on “Who is actually in control: Understanding investment risk, challenges, and solutions for asset owners and insurance professionals”, which features in a new report “Effective investment risk and data management for asset owners and insurance professionals” published by Clear Path Analysis in conjunction with Rimes.
In the report, industry figures from organisations including FactSet, Northern Trust Corporation, Vermont State Pension, discussed their views on these issues.
Falcucci was asked what areas were providing challenges for insurers.
“Getting timely data and having to manipulate it is a challenge for everyone,” he said on what areas were compelling asset owners to reassess their data platforms and management needs. “It’s hard to avoid this burdensome resource handicap.”
He added that the ability to integrate various data sources to facilitate more streamlined processes was part of the challenge that many insurers were trying to overcome.
For example, the ability to get Bloomberg platform data into actuarial software to perform asset liability modelling without using robotics in the middle process was given as a challenge.
The difficulty of these tasks varies depending on the type of asset that the team are working with, as well as how that fluctuation factors into the equations.
“These areas add more complexity because you have to complete processes multiple times because you have the exchange data and the private data."
“Insurers need a data platform that can adapt to changing business environment, product or investment strategy, or corporate activity,” said State Street’s 2022 report “Effective Data Management for Insurers”. “Managing portfolio data across different geographies is a priority for a third of insurers, and many respondents acknowledge this as an area they need work on,” said the report.
Falcucci agreed that it was an area that required a lot of work and investment. “Timely data for the more bespoke and market-to-model assets is so important,” he said on the kind of solutions he’d like to see. “These areas add more complexity because, oftentimes, you have to complete processes multiple times because you have the exchange data and the private data – which may or may not be available.”
This area could also give the advantage. A report by Accenture said, “through the utilisation of new data, new analytics and visualisation tools and fast and integrated processes, high performing carriers in the future will be much more proactive and forward-looking in how they manage their portfolios.”
Falcucci added that teams have to do an analysis to get it “out the door” and then redo that analysis once the actual data comes in. “You’re replacing the estimates with actual figures, which is time-consuming,” he said. “For those bespoke assets, it would be great to simplify the operational environment as a direct writer.”
This area of data timeliness becomes further complicated with the amount of outsourcing in this sector. Falcucci and his fellow panellists pointed out that when it comes to outsourcing, the cost isn’t the only important element, but it is necessary to think about.
“Establishing and maintaining an effective data management system
can be complex and resource-intensive.”
According to State Street’s report, many insurers are opting to outsource data functions by bringing in an external platform to amalgamate all data sources and streamline reporting and other processes as “establishing and maintaining an effective data management system can be complex and resource-intensive.”
The debate around this area (i.e., versus in-house construction) is not new. However, in 2023, a consensus has risen that outsourcing has obvious benefits.
“The benefits of outsourcing include being able to leverage what an existing vendor has off the shelf,” said Falcucci. “This infrastructure is already ready; it probably has all of the controls, is robust, comprehensive, and you can benefit from it immediately. Of course, there will be a cost. Depending on the size of your balance sheet, it could be more affordable or not, but the option is there.”
The flip side, he added, is that outsourcing might not be as flexible. “If, for example, you are going through a reinsurance transaction and you have a private debt portfolio that is in PDFs and not Excel, it will be tricky to pass it along to a vendor and have them return the data in a workable format.”
This, he said, is either due to data sharing restrictions or operating speed.
“Because of these constraints and scenarios – where you have to act quickly with new data formats – the ability to have functionality in-house is necessary,” he said.
“You need data to measure risks and make decisions, so if it can’t be shared
externally, you can’t do your job.”
The group also discussed how data-sharing restrictions can be inhibitive. This problem raises the question of how data privacy factors into the equation – and how to ensure due diligence when working with a service provider.
“Data privacy is a big issue because it can prevent information from being shared. This is more than a small obstacle,” said Falcucci. “You need data to measure risks and make decisions, so if it can’t be shared externally, you can’t do your job.”
He added that another aspect to consider is that teams might not be able to share data that should, instead, be warehoused with other data. “A good example happens with transactions in a portfolio of life settlements. If you are properly assessing the risks, you have to look at underwriting data from individuals, and this data just can’t be passed around freely,” he added.
This means that these teams find themselves in a situation where they have third-party infrastructure or a third-party vendor, but they can’t use the information because of data restrictions.
